The U.S. Supreme
Court ruled yesterday that California customers of DirecTV cannot sue the
satellite provider or bring class-wide claims in arbitration.

In a 6-3
decision, the justices said that DirecTV’s contracts can specifically prohibit
customers from banding together to sue the company, even if California law in
effect when the contract was signed provided otherwise.

It’s the latest
in a series of high court rulings that favor the ability of businesses to limit
their litigation costs by including mandatory arbitration in standard customer
contracts. Consumer advocates say such agreements rob customers of any
meaningful power to challenge corporate misconduct.

Writing for the
court, Justice Stephen Breyer said California law, as interpreted by the Court
of Appeal in the case before the high court, is preempted by the Federal
Arbitration Act, which lets companies require customer disputes to be settled
one by one in arbitration.

The case began
in 2008 when Amy Imburgia and Kathy Greiner filed class action lawsuits
claiming that DirecTV wrongly charged them cancellation fees. At issue was
language in the customer agreement that said contract disputes would be settled
through arbitration unless “the law of your state” prevents it.

In this case,
the Court of Appeal ruled, “the law of” California was that set forth in Discover
Bank v. Superior Court (2005) 36 Cal.4th 148, which held that waivers of
the right to class-wide arbitration violate the state’s public policy. Although
the holding was overruled after Imburgia and Greiner signed their DirecTV
contracts—in AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333—it
was part of the law by which Imburgia, Greiner, and DirecTV agreed to
arbitrate, the Court of Appeal reasoned.

Breyer, however,
saw it differently. He said language in the contract referring to state law
means “valid state law.”

Just because the
state law was valid at the time the contract was made did not matter if it
became invalid later, he said.

Justice Clarence
Thomas dissented, saying he does not believe federal arbitration law applies to
proceedings in state courts.

Justice Ruth
Bader Ginsburg issued a separate dissent, joined by Justice Sonia Sotomayor,
saying that parties to a contract can choose to be bound by a particular state
law, even if it is superseded by federal law.

Ginsburg said
the majority opinion and previous ruling in favor of arbitration clauses “have
predictably resulted in the deprivation of consumers’ rights to seek redress
for losses.” As a result, she said powerful companies can impose contracts
banning class action lawsuits “on people with little or no bargaining
position.”